Where’s the value in cloud?

By Jim Davis, SAS

According to Gartner1, the public cloud services market is forecast to grow 18.5 percent in 2013 to total $131 billion worldwide. Likewise, IDC research suggests public IT cloud services will enjoy a compound annual growth rate of 26.4 percent from 2012 to 20162, five times that of the IT industry overall.

We're seeing that – and then some – at SAS. In fact, we expect to see close to 100 percent growth in hosted software deployments this year and double or triple growth over the next two to three years.

Jim Davis is Senior Vice President and Chief Marketing Officer for SAS.

Why is this market growing? It's not just for cost savings and infrastructure savings. In many cases, hosted software deployments in the cloud are a way for organizations to deal with the lack of analytic talent in the marketplace.

When organizations look at decision making as a process as opposed to an application or solution, they can ask, At what point in the process can analytics add value in the decision-making process? Then they ask, Do we have that expertise in house? Can we acquire it? Or should we move that part of the decision-making process out into the cloud and have somebody who has the capacity do the analytics for us?

When approached from that angle, vendors can help address the shortage not only with software but also with a team of analytics experts. Then, the hosted application becomes more than just ping and pipe data movement inside a black box. It can also include value-added services, customized applications and specialized analytics built uniquely for the business. And it addresses another major business pain: the lack of analytic talent in the marketplace.

For example, SAS has an analytics lab of about 300 people, and probably 80 percent of them have advanced degrees. This team of analysts are able to provide that missing analytic talent for SAS® Solutions OnDemand customers and push the answers back out of the cloud.
So, we see cloud growing quite a bit, not just because the analytic technologies are available, but also because the expertise in the marketplace is in short supply.

Let's look at a few industry examples. We're hosting markdown optimization and price optimization applications for retailers in the cloud. In financial services, we do a lot of fraud detection applications. And pharmaceutical companies are analyzing drug development data through cloud-based applications.

Retail is definitely a leader in adopting these new deployment models. It makes sense for retail organizations to send purchasing and pricing data out to the cloud and to rely on a team of off-site analysts who can apply expert algorithms to the data.

When we talk about financial data in the cloud, however, a lot of people start asking about security. So this is where we need to draw a line between cloud computing and hosted applications. For example, we host the analysis of clinical trials data for life sciences, and anti-money laundering or fraud detection applications for lenders; those applications are in a very secure environment. It's something that is dedicated for that particular client.

These types of value-added, hosted software deployments are not unique to SAS. This is where the industry as a whole is headed. More and more businesses are expecting secure, off-site environments for analytics that also include services from analytics experts. As a result, we should all expect to see more specialized deployments in the cloud, and we should be prepared to staff the cloud with smart analysts, not just with big data centers and canned software applications.